Big Changes to IRS Form 1099 in 2011
The 1099 is a form most commonly associated with freelancers and consultants, not businesses and employees, however that could soon all change. With just a few short sentences in the 2010 health care act, the IRS form 1099 just became a whole lot more important.
The New Purpose of the 1099
The 1099 has practically been re-purposed from top to bottom thanks to health care reform legislation. Starting in 2011, the 1099 will function as a tax form for ALL business to business transactions of over $600. Yes, for each and every b2b sale or combination of sales worth more than $600, each party will have to collect information about the other and submit a 1099 to both the parties involved and the IRS. So, if your business were to purchase a laptop from WalMart for $600, you would have to fill out a 1099 form. Sound ridiculous? I think so too.
Completely Impractical
Let’s try to put this new law into perspective. Let’s say you own a hair salon in which you vend both services and products. In this hair salon you have probably 500 different hair, nail, and skin products, from 50+ different vendors. For each vender that sells you more than $600 of merchandise you’ll have to fill out a 1099. Should you advertise your location and spend more than $600, you’ll have to fill out another. Should you buy ink, staples, pens, paper, etc to stock your business you’ll fill out even more 1099s. Then, when paying rent to your landlord, you’ll have to give them another 1099. Can you see where this is going? Every business of every size is soon to have a HUGE accounting nightmare. Can you imagine keeping all these records?
Oh, It Gets Worse
Should businesses fail to get the proper paperwork in place, they cannot receive a payment. That’s right. By law, businesses that do not get a tax identification number (TIN) or social security number (SSN) are REQUIRED to withhold the payment. Wow.
A Business Killer
This new law appears as though it was written solely for the purpose of slaughtering business and keeping new and unestablished businesses from ever competing. Let’s say you own a small business and are looking for a few thousand promotional pens. You could purchase from your usual supplier for $700, and you wouldn’t face any additional paperwork since you buy from them already. Or you could purchase from a new vendor for $690. Hmm, $10 to save yourself an accounting headache seems like a good deal. I can’t imagine small businesses being able to handle this new bureaucratic onslaught very well. Have you taken a look at the tax code recently? It’s insane!
The Land of Opportunity Is No More
This didn’t happen overnight. The tax code doesn’t grow to more than 2.5 million pages (including accompanying regulations) in one day. The land of opportunity for small business is crumbling. It is a growing bureaucracy that is paving the way for the destruction of small business in America. I can only hope that this provision is repealed, otherwise it is just one more chunk gone from the American Dream.
This is the most insane thought ever. We need to begin the repeal now!! You can really tell that lawmakers are not business people. I think they should have to produce a 1099 for everyone they write a check to or get a check from
THIS IS SO UNBELIEVABLE SO ASININE THAT IT CANNOT WITHSTAND OUR DEMAND THAT IT E REPEALED
Hey Pat,you are right-none of those bureaucrats ever worked in the private sector-Obama is scraping the bottom of the barrel to pay for his insane policies
AS they say-You can’t fix stupid.
Where do I go to petition to have this ridiculous increase in government cost and paperwork repealed?
Hold on everyone. This is really much easier than it sounds. If you use Quickbooks, it will generate your 1099’s for you. Here’s a link to show you just how easy it is: http://knovaadmin.intuit.com/IPH/Core/QB2K7/payextras_n/1099_n/task_1099_setting_up.html
Initially, I was shocked too - but then I remembered my Quickbooks has this taken care of. I’m sure some of the other small business accounting programs do the same thing. To make this even easier - if you don’t have your tax id number on your invoices yet - put it on. If you are using you SSN as your tax id number - get a tax id number instead. Here’s a link for that: http://www.irs.gov/businesses/small/article/0,,id=102767,00.html
Kelly, what makes me think you’re entirely missing the point?
Maybe we should get the Environmentalist Groups to save the trees!
The paperwork will be horrendous, and don’t think the accountants are not going to have their prices go UP as their costs increase. So will mine as I have to spend the time to gather up and send out all this info. This is government control at its worst and only the beginning….WE HAD ALL BETTER WAKE UP! It’s time to replace EVERYONE who voted for this. Id like to know what it was doing in the HEALTHCARE bill. Of course they never read it. Transparency in Government? Hah!
@Kelly
Kelly, you are kidding right? We’re discussing the government’s requirement for us to generate an onerous, ridiculous mountain of useless and unmanageable paperwork, and your first thought is it isn’t so bad since QB can gin out the forms? I think we are referring to a broader, more troubling issue.
Sure, all of this might make sense if you have QB AND you know the TIN/SSN (federal tax id or ssn) of the individual or business from which you make purchases. Oh yeah, read further in the legislation and you will see that you are in violation of the law if you pay the vendor and do NOT have his TIN or SSN. Look at it this way, it is against the law to pay your teen babysitter if he/she does not give you their SSN … provided you pay over $600 per year to the babysitter.
What are most impressive about the comments offered by this BLOG re this tax law change are its omissions. 1) Regulations regarding the specifics of application and enforcement have yet to be defined. The IRS is requesting public comments on how to minimize the burdens. (http://www.irs.gov/newsroom/article/0,,id=225029,00.html) 2) Per the IRS, itself, “Under a proposed regulation, many business purchases made with credit or debit cards would be exempt from the new reporting requirement because they are already reported by banks and other payment processors.” 3) If #2 is in fact implemented, reporting burdens will likely be far less than suggested, as a great number of small businesses make their purchases with credit and debit cards. It seems likely to me that those that don’t now, will want to use this simple solution. 4) Readers please note that this BLOG failed to give you any concrete points of reference regarding the implementation of the regulation. It didn’t identify the specific law or sections thereof that would have allowed you to investigate. It didn’t suggest checking out the IRS website and press release providing basic reference information. It didn’t mention that you have the chance to comment, directly to the IRS, regarding implementation. (Instead of whimpering, contact the IRS and speak up for your ideas. Do it now.) It didn’t even suggest you contact a legislator or tax professional for additional information. 5) In my opinion, such “reportage” amounts to willful misinformation (i.e., misrepresentation) and may simply be considered propaganda.6)Propaganda parading as reportage is bad for the health of our country. This BLOB could and should be rendering its readers a true service. That it chose not to speaks volumes.
@Kelly this is total bull shit.
how can we the small business owners appeal and repeal this???????????????????????????????????????????????????????????????????
this is NOT REFORM MR OBAMA - YOU SIGNED A SHITY ASS BAD CORRUPT BILL AND YOU KNOW IT.